6 Air Canada spent most of the year tying to undo the eff ts of Aero's tnisrepresentation and its failure 19 pay. As significant portions of he inventory would not be used within twelve months, Air Canada and Aero agree to have non conforming ports substituted for conforming parts. As Acro ac tued tens of millions of dollars in debt to Air Canada fem filing or refusing to ay For CAT 3 inventory purchased or subsite, it alto agreed to give back five of the bills of xchange in April and August to sot them off against amounts owing, 1. KPMG Ine, as trustee in Bankruptcy forthe Aero Companie , now sacks a iclration that various transtetione used to elfectivaly unwind the A ro transection were prferonces and are void against the trustee. I swear this affidav tin opposition to the trust's motion and in esponse to the affidavit of Martin ¥ebster tie 19 support of it, sworn April 28,2010 (the “Webster Affidavit") BACKGROUND TO THE LIVE MAINTENANCE AGREEMENT: AVEOS' Wal WITH AIO. ‘Contra AIR CANADA TO ENTER ITS Ow AGRE ‘Air Canada(s Maintenance and Repair ‘Ais Canada and Air Canada Technical Services 8, Air Canada is Canada’s largest domestic and international ailing and she Targest provider of scheduled passenger sorices in the Canad an marke, the Canada-US trans-border mesket and inthe international market toa «from Canada, A copy of Air Canada's 209 Annual Information Form dated ¥ arch 26, 2010 is ppencled to this my affidavit as Exi vo4, Uni September 2004, maintenane, repair ane! overhaul ("MO") servies wwote provided t9 Als Canada by its inhouse maintenance divisior Air Canada “Technical Sevices ACTS"), ACTS provided “nose-to-tal” maintena ce and repair for Air Canada a5 well as other airines. including airframe, engine sd component snaintenance and line maintenance line maintenance generally being considered to be minor maintenance performed om an aircraft that is in-srvies but between Slight) 10, ACTS also provided! Air Canada with supply chain manag ment servies including inventory management, procurement, and logistics) relat gto parts and materials to be used in the provision of MRO services, These part and materials deluded the "CAT 3 Inventory” referenced in my First Affidavit chat are either singlesuse tems tht are not capable of repair or items which, ater performance of certain procedures, are re-cerifiable for limited periods, ‘AirCanada Outsources Inventory Management to Aveos: Disposes f Inventory 31. 1n20%8, Air Caneda applied for and was granted protection f om its creditors in widely publicized proceedings under the Companies’ Creitors + rmngement Act RSC. 1985, ¢.€36 (the “CCAA"). Air Canada emerged from CC! A protection om september 30,2004 and ACE Aviation Hoings nc ("ACE") Beer: the new pare company under which the reorganized Air Canada was held. As part of the implementation ofthe CCAA plan, ACTS! MRO business was ta sferred to ACTS Limited Partnership ~ except forthe line maintenance business (ed very minimalCAT 3 Inventory parts andl materials nceded for that business) an spare parts already designated for Air Cenada's aireait. ACTS Limited Partner hip became 2 fallservice MRO standalone entity under ACE. ACTS Limited Partn ship's aseis were later sald, om a going concern basis, ACTS LP, also directly hele by ACE. 12. On fune 22,2007, ACE announce that it had agreed to sll 20% terest in the business of ACTS LP to a consotiam consisting of Sageview Capital LLC, a private investment fir and KKR Private Equity Investors, IP, the jublly traded furs of Kohlberg Kravis Roberts & Co, The transaction was comple =d on October 16,2007. ACTS Aero Technical Support & Services Inc, which wor d be rename “aveos Fleet Performance Ine.” in September 2008, conductee the business previously operated by ACTS LP, The entity thot carried on the bt nes ater che sale ~ ACTS Aero Technical Support & Services Inc. Aveos Flet Pe former In. ~ ishureafter referred to as “Aveos” 13, Avon was, and is, MRO service provider tothe aiine In sty, offering, amonggt other things, airfare services, engine and aunilay pow unit services, component serviees, supply chain management and technical recor s management ‘Aveos represents that it serviced more than a hundeed global custo ners, although believe that Air Canada remained is largest customer. Copies o Aveos’ website materia, “Key Facts” and brocture ae appended to this my affidavi as Exhibit “B" 44, Teior to, and following, the disposition of Aveos by ACE, / it Canada relied ‘upon Aveus for heavy muiatenance(inlucing the management an. procurement of